Market Bounces Back, Another dead cat Bounce?

The Indian market opened with a gap up and ended with a gains of 106 points i.e. 1.37% to close at 7823. The rise in the second half came in from strong European market with CAC, DAX and FTSE up around 1-1.5%. The strength in today’s pocket was from the metals and banks. The highest gaining stocks today in the trade were Cairn(5.78%), TataSteel(4.58%), HDFC(4.37%), Axisbank(4.15%), Ultracement(4.12%) while on the losing side it was IDEA(3.01%), Bosch(0.95%), Lupin(0.77%), Heromotocorp(0.68%).

Government has decided to invest Rs 8.5 lakh crore in Indian Railways– The Government has decided to invest Rs 8.5 crore in railways focusing on infrastructural development in order to boost growth. “After a decade of chronic under investment in Indian Railways we have decided we will invest Rs 8.5 lakh crore in Indian railways alone. This is extraordinary and will change the face of railways in India,” said Jayant Sinha,Minister of State for Finance. The government has also has doubled the investment in roads this year.

IRB Infra up by 2.5%– The company has started concession agreement with National Highway Authority of India (NHAI) for the project of six laning of Agra-Etawah Bypass section of NH-2 in the state of Uttar Pradesh. The project is on Design-Build-Finance-Operate-Transfer (DBFOT) basis and the estimated cost is approximately Rs 2,650 crore. The concession period of the project is 24 years, with construction period is 910 days. The company has offered premium of Rs 81 crore to NHAI, which will increase by 5 percent, YoY. The company including this project has expanded its base in 8th state. The share was up by 2.5% on the back of such news.

Metal counter shines– Almost all the metal stocks were up in today’s trade in the range of 1-5% like Tata Steel(4.67%), Vedanta(4.41%), Hindustan Zinc(4.22%), Hindalco(3.83%), Hindustan Copper(1.07%). The metal stocks have been in a downtrend and most of them are trading at 52 week low. Few of the stocks which are leader in their sector are trading at bargain prices. Tata Steel with a market cap of 22303.96 is now trading at a P/E of 4.12, P/B ratio of 0.33, dividend yield of 3.48% and Hindustan Zinc with a market cap of 56365.76, trading at a P/E of 6.65, P/B of 1.30 and dividend yield of 3.30%. So is it the bottom of the downward phase? Who knows, it may be. Its very important to do our homework and to find out is there any margin of safety to invest in these stocks. By the way you know what is margin of safety? It is a term propounded by Benjamin Graham, the father of Value Investing and even his followers like Warren Buffett had followed it extensively.It means buying the share below its Intrinsic value. However it does not guarantee a success but provide cushion for error in person’s judgement. Warren Buffett said,” Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sales gives good results”

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